Shareholder Protection for Businesses in North Devon
The sudden loss of a shareholder will cause a huge disruption to a company. It can also cause severe financial stress at a time when you least expect it. Shareholder Protection will minimise the interruption to the business.
There is a great deal of information to be considered when taking out policies for Shareholder Protection In its simplest form, each shareholder has an ‘Own Life Plan’ written into a business trust.
The reason for this is if a shareholder dies, the other shareholders will receive the funds from the trust to buy the shares from their beneficiaries. If the shareholder suffers from a critical illness the funds can be used to hire a replacement employee.
As a business grows in value, so the value of the shares increase. If one of the shareholders dies, their beneficiaries will inherit their share of the business according to their will. The other shareholders may not want the beneficiaries involved in the business, or the beneficiaries may want to exit the business and as such will expect to be paid for their share.
Not many businesses have the capital or cashflow to be able to accommodate this. Shareholder Protection enables the purchase of the share to take place using the life policy that was in place.
The short answer is yes. The level of cover needs to be calculated fairly, and the policies written into the appropriate type of trust. There may be a need for a document called a cross-option agreement to be drawn up, protecting both the remaining shareholders (the company) and the deceased’s beneficiaries. Aspire Financial Services will provide the appropriate advice and work hand in hand with the top providers in the market.
Call us to for a free 30-minute consultation find out how we can help you to protect your business.